University wins record $1.17 billion verdict against Marvell Semiconductor

Carnegie Mellon latest school to play 'patent roulette' at court.

A Pittsburgh jury found that hard drive control chips made by Marvell Semiconductor infringe two patents owned by Carnegie Mellon University. Following a four-week trial in federal court, nine jurors unanimously held that Marvell should have to pay $1,169,140,271 in damages—the full sum that CMU's lawyers had asked for.

If the verdict holds up on appeal, it would wipe out more than a year of profits at Marvell, which made a bit over $900 million in 2011. It would also be the largest patent verdict in history, beating out this summer's $1.05 billion verdict against Samsung for infringing patents and trademarks owned by Apple.

The two CMU patents describe a way of reducing "noise" when reading information off hard disks. The jury found that Marvell's chips infringed claim 4 of Patent No. 6,201,839 and claim 2 of Patent No. 6,438,180. At trial, Marvell hotly contested that CMU had invented anything new; they argued that a Seagate patent, filed 14 months earlier, describes everything in CMU's invention.

Court documents showed that Marvell sold 2.34 billion allegedly infringing chips between 2003 and 2012, according to a report on the case in the Pittsburgh Tribune-Review. About half of the chips were sold to Western Digital. Seagate is also a major purchaser of Marvell chips.

There have been patent verdicts larger than $1.17 billion, but none have held up. Alcatel-Lucent was able to nail Microsoft with a $1.5 billion patent verdict over MP3 technology in 2007, but the judge in the case overturned that verdict shortly after trial. In 2009, Johnson & Johnson's Centocor unit successfully sued Abbott Labs for $1.67 billion in patent damages, plus interest, but the patent was knocked out on appeal in 2011.

Marvell is based in Santa Clara and the company is one of Silicon Valley's success stories. Its founder Sehat Sutardja grew up fixing radios in his Jakarta home, ultimately getting his PhD in computer science from UC Berkeley before founding Marvell Semiconductor in 1995.

Universities increasingly involved in patent litigation

The new verdict is the starkest example yet of how universities are becoming more insistent that corporations pay them for their patents.

Some recent examples: Cornell sued Hewlett-Packard over a computer-processor patent and a jury awarded the university $183 million in 2009; the award was later reduced to $53.5 million [PDF]. Northeastern University and an associated startup called Jarg sued Google over a Web patent, and that case settled for an undisclosed sum in 2011. The University of California is co-owner of the Eolas patent, which was notoriously used to claim ownership of any "interactive" website. That patent was invalidated earlier this year, but not before UC was able to collect $30.4 million from Microsoft for a patent license.

And Stanford fought a long-lasting battle against Roche to collect royalties on an HIV testing patent, which ended when the Supreme Court ruled that Roche actually should have been a co-owner of that patent all along.

Universities usually benefit from one of the key advantages enjoyed by pure patent-licensing companies: they can't easily be countersued for patent infringement themselves because they have no products. In 2007, some universities sided with drug companies and patent-licensing companies to oppose patent reform, worried it would hurt their opportunities to make money from their patents.

Some of the new, aggressive university licensing practices were chronicled in a 2007 paper by leading patent scholar Mark Lemley, provocatively titled "Are Universities the New Patent Trolls?"

Still, while many universities may want to plug funding gaps with patent riches, not many can pull it off. As Brian Love, a professor of patent law at Santa Clara University, pointed out, most universities end up net losers in the game of "patent roulette," with their patents costing them more money than they make.

CMU never engaged any company to manufacture products based on the patents-in-suit, according to court documents. That suggests the lawsuit is a case of pure patent-monetization on the part of CMU, notes Love, rather than a research partnership gone wrong.

Marvell still fighting for mistrial

Marvell stock is trading down more than 10 percent following today's verdict. Documents from the case show that Marvell is still awaiting a final ruling on its request for a mistrial, filed shortly before the case went to the jury.

Marvell lawyers said CMU's closing statement was "rife with misrepresentations," including suggestions that Marvell "broke the chain of innovation by not paying the royalties that they now owe," and noting those payments would be used "to fund further research, to lead to further innovation." That resulted in a short conference at the side bar, in which the judge warned "you can't dig deep into all of CMU's contributions to society and mankind."

CMU's attorney also started to compare Marvell's alleged patent infringement to identity theft. "The invention in this case is like your electronic identity, your credit card numbers, your Social Security number," said CMU lawyer Douglas Greenswag. "It's that which [sic] are very personal and valuable to you. You devote years to building up your reputation, your credit rating, your standing. One day Marvell sneaks in—"

At that point he was cut off by an objection and was not able to complete the analogy.

US District Judge Nora Fischer denied Marvell's motion last week, without prejudice, in order to reconsider it again "in light of the entire record, argument, and legal authority."

Fischer has set a schedule for briefing post-trial issues that requires both sides to file motions between February and April of next year, with a motions hearing scheduled for early May.

145 Reader Comments

I don't know how they come up with these amounts of money but I'm pretty sure these they two patents aren't worth over a year of income. Abusing the patent system should carry a fine 10 times the amount of the abusive award.

$1.17 billion for what must amount to an algorithm in a chip (and a minor one among many at that), which then goes onto a circuit board, and then into a hard drive? Patently absurd. The fact that judges keep knocking down these gigantic awards show how badly the patent system has gone off the rails.

We need to load bullets in all the chambers when these trolls play patent roulette.

So, are you calling CMU a patent troll like you've done into the past? "Patent monetization" sounds like double speak. Why the change of tone when Ars has been so stridently anti-patent trolls in the past?

This is good. Take out Marvell. That'll seriously compromise Seagate and WD. Give us a new HDD crash. Threaten the supply for data centers of Google, Facebook, Amazon and the likes.

There needs to be a coming together of "the families" of Silicon Valley, where they finally concede: this patent bullsh*t has got to stop. It served them well when they would just cross-licence with each other and use their portfolios to kill competition. But patent trolls have nothing to cross-licence.It's like the atomic bomb. It's fun when you're the only country that has it. Once your enemy has it, it becomes a curse.

I can't imagine patent trolls having much life in them once the big names of IT - who ARE the American Economy today - join up and go to D.C.

Coming history books might tell the story of American greed, that had companies move all their know-how to China to profit from their slave labor. And while the American juggernauts engaged in the desastrous Patent Wars, their former slaves flooded the markets with clones.

There will come a time when America can't produce anything anymore, because all these millions of patents cover everything and even the most basic electronic component will carry a minimum of 12$ in patent fees.

So, are you calling CMU a patent troll like you've done into the past? "Patent monetization" sounds like double speak. Why the change of tone when Ars has been so stridently anti-patent trolls in the past?

Well, in fairness CMU is a legitimate R&D organization whose patents are likely to have come out of an expensive research process rather than being purchased from someone else or the result of throwing ideas to the wall to see what they can get away with. That doesn't make their behavior laudable by any means, but also it doesn't quite made them as odious as most patent trolls.

This is good. Take out Marvell. That'll seriously compromise Seagate and WD. Give us a new HDD crash. Threaten the supply for data centers of Google, Facebook, Amazon and the likes.

There needs to be a coming together of "the families" of Silicon Valley, where they finally concede: this patent bullsh*t has got to stop.

I can't imagine patent trolls having much life in them once the big names of IT - who ARE the American Economy today - join up and go to D.C.

I was hoping Apple's war on Android would be enough, but it's been watered down and counter-sued and appealed and mitigated into irrelevance, as I suspect this will be. The powers that be will try to contain things for as long as possible.

At least Apple sells a product, and can possibly make a case that Android hurts them. How is a university harmed by a chip vendor's existence? Ah, just by the money they didn't get (or even try to negotiate for) all those years.

I wish there was some sort of site that detailed the number of patents given public universities held, along with how often they litigate based on them. I would be swayed in my decision of where to help or not to help my children attend higher education if such a thing existed.

Fund universities properly, and stop them from patenting the creativity that emerges from them. Universities are not supposed to be businesses, are not supposed to be run like businesses, and this kind of trolling (forced on them as a source of funding) must be an embarrassment to those who see their role as one of education and creativity.

Rather than re-hashing the problems of patents & trolls, I'd be interested in hearing more about the earlier Seagate patent, and why CMU's patent was or wasn't a trivial improvement on that. With $1G at stake, Marvell might try to focus some attention on that.

(Admittedly, good answers might need to come from a patent atty. specializing in this area:)

From the quotes, CMU's attorneys seemed mostly to represent CMU as a charitable cause, to which the jury should "donate" a tall stack of someone else's money. A whole lot of folks might not call that justice.

Fund universities properly, and stop them from patenting the creativity that emerges from them. Universities are not supposed to be businesses, are not supposed to be run like businesses, and this kind of trolling (forced on them as a source of funding) must be an embarrassment to those who see their role as one of education and creativity.

CMU is a private institution, so I fail to see what your proposal of "funding universities properly" will do.

does anyone really believe the capital incentives for patents are actually making a positive difference for innovation and broad benefits to humanity. I think most feel patents simply drive $1 from billions of people to a handful of people - yet another way to do little or nothing for the general population.

I don't know how they come up with these amounts of money but I'm pretty sure these they two patents aren't worth over a year of income. Abusing the patent system should carry a fine 10 times the amount of the abusive award.

it works out to about 100 million each year from 2003-2012 + interest..

So, what's the point of this article? what are you trying to say? Are you implying that CMU is on the wrong just because they didn't turn it into a product? Are you implying that CMU is a patent troll? If this is what's going through your mind, you have 0 (zero) understanding of patents.

Does anyone have an understanding of intellectual property? I see so much flying around I'm surprised if there's any kind of consensus.

There needs to be a coming together of "the families" of Silicon Valley, where they finally concede: this patent bullsh*t has got to stop. It served them well when they would just cross-licence with each other and use their portfolios to kill competition. But patent trolls have nothing to cross-licence.It's like the atomic bomb. It's fun when you're the only country that has it. Once your enemy has it, it becomes a curse.

There was one already... for years "mutually assured destruction" kept the companies from using their patents on each other. They'd just sign cross-license agreements and continue doing business. The problem is that patent trolls aren't part of that "family", and there's no leverage or threat that can be used against them. The change has to happen in DC, now, and possibly to a lesser degree in circuit courts. Maybe the new patent office will help a little, and same with first-to-file, but it's not enough.

Fund universities properly, and stop them from patenting the creativity that emerges from them. Universities are not supposed to be businesses, are not supposed to be run like businesses, and this kind of trolling (forced on them as a source of funding) must be an embarrassment to those who see their role as one of education and creativity.

CMU's endowment in 2011 was 1bn in 2011. They're not starving for cash.

Secondly, if some of these public universities are charging 12 - 30k a year per student and still crying how they need more public funding. They're obviously not using their resources very efficiently.

Lastly, CMU is a privately funded institution and shouldn't be getting public funding to begin with.

it works out to about 100 million each year from 2003-2012 + interest..that is a more than reasonable sum

You're kidding, right? They infringed on 2 patents, on one of their chips. They make likely hundreds of chips, using thousands of patents, and you think this infringement was worth 10% of their income?

it works out to about 100 million each year from 2003-2012 + interest..that is a more than reasonable sum

You're kidding, right? They infringed on 2 patents, on one of their chips. They make likely hundreds of chips, using thousands of patents, and you think this infringement was worth 10% of their income?

It is a ludicrous sum.

(Correction, wasn't just one chip. Stand by the general point though)

maybe 10% is also punishment in an effort to curb this sort of behaviour. while I agree that 10% is high, it has just as much to do with stopping the crime as it does restitution.

it works out to about 100 million each year from 2003-2012 + interest..that is a more than reasonable sum

You're kidding, right? They infringed on 2 patents, on one of their chips. They make likely hundreds of chips, using thousands of patents, and you think this infringement was worth 10% of their income?

It is a ludicrous sum.

(Correction, wasn't just one chip. Stand by the general point though)

maybe 10% is also punishment in an effort to curb this sort of behaviour. while I agree that 10% is high, it has just as much to do with stopping the crime as it does restitution.

Per the article: "CMU never engaged any company to manufacture products based on the patents-in-suit, according to court documents. "

What crime? I read that as they never asked Marvell for anything up front; they only demanded and sued after the fact. Do I misread?

it works out to about 100 million each year from 2003-2012 + interest..that is a more than reasonable sum

You're kidding, right? They infringed on 2 patents, on one of their chips. They make likely hundreds of chips, using thousands of patents, and you think this infringement was worth 10% of their income?

It is a ludicrous sum.

(Correction, wasn't just one chip. Stand by the general point though)

maybe 10% is also punishment in an effort to curb this sort of behaviour. while I agree that 10% is high, it has just as much to do with stopping the crime as it does restitution.

But they're NOT stopping a crime! They're abusing a broken law for their own benefit. This helps nobody, fixes nothing, and is justice for no one.

maybe 10% is also punishment in an effort to curb this sort of behaviour. while I agree that 10% is high, it has just as much to do with stopping the crime as it does restitution.

I agree with your point in general --- after all, plenty of people here (including myself) wish that companies that cause massive destruction of the environment would pay more than token fines to strongly discourage them from continuing to do so --- but given that Seagate was probably not even aware of this patent's existence until it had already manufactured the products in question they clearly hadn't needed it, and so it is hard to see how there is any sort of crime here in any meaningful sense of the word.

So, are you calling CMU a patent troll like you've done into the past? "Patent monetization" sounds like double speak. Why the change of tone when Ars has been so stridently anti-patent trolls in the past?

I consider patent trolls to be companies or entities whose entire profit scheme is simply to buy and hold patents so that they may extort and litigate against those that make anything that resembles use of those patents. Universities hardly fit that role as they actually engage in research that creates something. If anything this case is only another among dozens that we've already seen this year that shows how broken the patent system is in this country and how badly it needs to be fixed. It's also another case that shows why software patents were an awful idea and should be done away with. I mean 1.17 billion dollars for a pair of patents that don't even comprise an actual product themselves is just over the top insane.

Panick, I agree with your general point (having written along similar lines myself earlier in the thread), but

Panick wrote:

Universities hardly fit that role as they actually engage in research that creates something.

It is worth noting that this does not apply at all in this case as their patent had likely not been used in the manufacture of Seagate's products and yet they are asserting that they should be paid for it anyway.

Well I guess that should clear up any uncertainty of whether universities are companies for profit. Don't get me wrong, i'm all for higher education - places like CMU regularly think outside the box and create concepts that change the world..... but I'm hard pressed to see where over a billion in damages is justifiable. Granted, i'd need much more information on the situation to feel like I had an informed decision - but I don't like seeing these billion dollar verdicts. Its not like Marvell is competing with CMU in the space either. If they did willfully infringe, then of course I think they should have to pay some form of compensation - but 1B+..... i have trouble seeing that.

Secondly, if some of these public universities are charging 12 - 30k a year per student and still crying how they need more public funding. They're obviously not using their resources very efficiently.

Most "public" school are public in name only and get a majority of their funding through research agreements and patents, agreements with big businesses (only teach our software, books, etc. and we'll give you money), sports and team licensing and the ever-increasing tuition fees. The actual public state money (outside of Pell Grants and Stafford loans) they actually get is sometimes in the 10-15% range these days. They also have large fixed costs that can't easily be reduced (payroll and benefits, building upkeep and mortgage, advertising, technology, etc.) which ends up with them often being strapped for cash. I went to a small public university where even the athletics department (which often get a disproportional amount of funding) was visibly underfunded even though the teams were pretty good.

Quote:

Lastly, CMU is a privately funded institution and shouldn't be getting public funding to begin with.

Most private schools still get some kind of public money outside of students grants and loans.

... but given that Seagate was probably not even aware of this patent's existence until it had already manufactured the products in question ...

I believe that's called "due diligence."

That is completely irrelevant to my point, which was that in this instance CMU did not engage in research that resulted in the creation of something, as the product was likely created without their research.

Well, in fairness CMU is a legitimate R&D organization... That doesn't make their behavior laudable by any means, but also it doesn't quite made them as odious as most patent trolls.

Didn't save the CSIRO from being assigned the label.

Please link to an article where Ars explicitly called CSIRO a patent troll; I did a cursory search and wasn't able to find one. (I am not saying that I am certain that no such article exists, only that I will not believe your claim until I see the evidence for it.)

Having said that, I agree with you that it treated CSIRO harshly, but I suspect that if CMU claimed that basically invented WiFi and deserved to get a cut out of ever WiFi-enabled device then they would have been treated more harshly so there isn't a strong inconsistency here.

... but given that Seagate was probably not even aware of this patent's existence until it had already manufactured the products in question ...

I believe that's called "due diligence."

That is completely irrelevant to my point, which was that in this instance CMU did not engage in research that resulted in the creation of something, as the product was likely created without their research.